Is This A Good Time To Buy A New Car?

11 December 2009, 09:29

Everyone needs a new car from time to time. And there are lots of reasons why you might be motivated to actually buy one, depending on whether your old car is in good condition or whether it has broken down for the last time.

But we have a unique set of conditions in place at the moment that is causing sales of new cars to rise quite a lot. This might be surprising since Christmas – a traditionally expensive time of the year – is very close. So what is the reason for this?

The answer, quite simply, is VAT. And more specifically, it is the fact that the rate of VAT is going to increase by 2.5% at the beginning of January. That small increase can make a big difference when it comes to saving a lot off a new car, so it is small wonder so many people are deciding to make the most of it.

The normal rate of VAT is 17.5%, but this was reduced to 15% just over a year ago as the government sought to encourage people to spend more money. The reason for this was the recession, and at the time they stated the rate would revert to the normal 17.5% at the beginning of January 2010.

So although we have largely saved money over the past year, it would appear that we are seeing a final surge of savings to be made as everyone realises the price of a new car is about to rise. Apparently November was a big month all in all in this respect, so it will be interesting to see if December matches up in the same way.

Compared to 2008 at this stage, half as many people again went out during November to treat themselves to a new car. So could the same happen again during December?

There is every chance it could, but we shall have to wait until the New Year when the figures are released before we will know for sure. But it certainly seems as if the VAT decrease has had more of an effect than we may first have thought – and ironically it seems to be happening at the very end of its life.

So keep an eye on the news over the next few weeks as people make the most of this last chance to get a cheaper new car.